What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-13 · 421 added, 1029 removed, 555 unchanged (72% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30,

and cash equivalents

in Eton Pharmaceuticals

receivable, net

expenses and other current assets

current assets

Cash and cash equivalents

Investment in Eton Pharmaceuticals

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Capitalized software costs, net

Deferred financing costs

Operating lease right-of-use assets, net

Intangible assets, net

plant and equipment, net

software costs, net

lease right-of-use assets, net

$ 295,536,000

$ 313,174,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

AND STOCKHOLDERS’ EQUITY

payable and accrued expenses

rebates and copay assistance

payroll and related liabilities

revenue and customer deposits

portion of operating lease obligations

current liabilities

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of operating lease obligations

Total current liabilities

Operating lease obligations, net of current portion

Accrued expenses, net of current portion

Notes payable, net of unamortized debt discount

TOTAL LIABILITIES

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 35,117,621 and 29,901,530

shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

lease obligations, net of current portion

expenses, net of current portion

payable, net of unamortized debt discount

and contingencies

STOCKHOLDERS’

stock, $ 0.001 par value, 50,000,000 shares authorized, 35,380,955 and 35,168,260 shares issued and outstanding at March 31, 2024

and December 31, 2023, respectively

paid-in capital

( 147,469,000 )

( 133,904,000 )

TOTAL HARROW, INC.

STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

Noncontrolling

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 295,536,000

$ 313,174,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

accompanying notes are an integral part of these condensed consolidated financial statements

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales, net

4 unchanged sentences

( 8,271,000 )

( 28,338,000 )

( 19,218,000 )

Operating expenses:

2 unchanged sentences

Total operating expenses

Income (loss) from operations

(Loss)income from operations

( 6,928,000 )

Other (expense) income:

2 unchanged sentences

( 4,747,000 )

( 16,200,000 )

( 5,386,000 )

Equity in losses of unconsolidated entities

( 3,504,000 )

( 9,036,000 )

Investment gain (loss) from Eton Pharmaceuticals

( 1,031,000 )

Investment (loss) gain from Eton Pharmaceuticals

( 1,248,000 )

1 unchanged sentence

( 5,465,000 )

Other expense, net

Other income, net

Total other expense, net

1 unchanged sentence

( 8,141,000 )

( 19,333,000 )

( 18,763,000 )

Loss before income taxes

( 2,852,000 )

( 6,429,000 )

( 14,027,000 )

( 15,066,000 )

Income tax expense

( 1,539,000 )

( 1,236,000 )

Net loss attributable to Harrow, Inc.

Loss before income tax expense

( 13,565,000 )

( 6,931,000 )

Income tax benefit

( 13,565,000 )

1 unchanged sentence

Basic and diluted net loss per share of common stock

Weighted average number of shares of common stock outstanding, basic and diluted

accompanying notes are an integral part of these unaudited condensed consolidated financial statements

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

the periods ended September 30, 2023 and 2022

Weighted average number of shares of common stock outstanding, basic and

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2024 and 2023

Noncontrolling

6 unchanged sentences

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

5 unchanged sentences

( 6,643,000 )

Balance at September 30, 2022

$ 111,738,000

$ ( 110,548,000 )

$ ( 355,000 )

Balance at December 31, 2022

$ 137,058,000

$ ( 109,493,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Public offering, net of offering costs

Exercise of consultant stock-based options

Exercise of employee stock-based options

Vesting of RSUs and PSUs

Shares withheld related to net share settlement of equity awards

( 12,970,000 )

( 12,971,000 )

Stock-based compensation expense

( 15,263,000 )

Balance at September 30, 2023

Balance at March 31, 2023

$ 137,989,000

4 unchanged sentences

Stockholders’

Balance at June 30, 2022

$ 109,806,000

$ ( 104,084,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

Stock-based compensation expense

( 6,464,000 )

Balance at September 30, 2022

Balance at December 31, 2023

$ 204,635,000

1 unchanged sentence

$ ( 355,000 )

Balance at June 30, 2023

$ 204,635,000

2 unchanged sentences

Issuance of common stock in connection with:

Public offering, net of offering costs

Exercise of employee stock-based options

Vesting of PSUs

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

6 unchanged sentences

( 13,565,000 )

Balance at September 30, 2023

Balance at March 31, 2024

$ 207,995,000

1 unchanged sentence

$ ( 355,000 )

$ 207,995,000

$ ( 147,469,000 )

$ ( 355,000 )

accompanying notes are an integral part of these unaudited condensed consolidated financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ ( 6,643,000 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization of property, plant and equipment and software development costs

1 unchanged sentence

Amortization of operating lease right-of-use assets

Provision for credit losses

(Recovery of) provision for credit losses

Amortization of debt issuance costs and debt discount

Investment (gain) loss from investment in Eton

Investment loss (gain) from investment in Eton

( 2,042,000 )

Equity in losses of unconsolidated entities

Loss on extinguishment of debt

Loss on disposal of intangible assets

Stock-based compensation

Deferred income tax

Changes in assets and liabilities:

2 unchanged sentences

( 2,552,000 )

( 2,383,000 )

( 1,066,000 )

Prepaid expenses and other current assets

Accounts payable, accrued expenses, accrued rebates and copay assistance

( 8,939,000 )

Accounts payable and accrued expenses

Accrued payroll and related liabilities

( 1,111,000 )

Deferred revenue and customer deposits

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

NET CASH USED IN OPERATING ACTIVITIES

( 4,628,000 )

( 8,214,000 )

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in patent and trademark assets

Purchase of product NDAs, marketing authorizations and patents

Purchase of product NDAs and related patents

( 130,474,000 )

Purchases of property, plant and equipment

( 1,266,000 )

( 1,719,000 )

NET CASH USED IN INVESTING ACTIVITIES

( 130,970,000 )

( 1,738,000 )

CASH FLOWS FROM FINANCING ACTIVITIES

9 unchanged sentences

( 59,750,000 )

Proceeds from public offering of common stock, net of costs

Payments on finance lease obligations

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 5,547,000 )

( 77,022,000 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, end of period

CASH AND CASH EQUIVALENTS AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

4 unchanged sentences

Accrual of exit fee related to Oaktree Loan

Insurance premium financed

Purchase of intangible asset included in accounts payable and accrued expenses

Purchase of property, plant and equipment included in accounts payable and accrued

Purchase of property, plant and equipment included in

accounts payable and accrued expenses

Right-of-use assets obtained in exchange for new operating lease obligations

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Income taxes owed for exercise of options

Insurance premium financed

accompanying notes are an integral part of these unaudited condensed consolidated financial statements

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the Three and Nine Months Ended September 30, 2023 and 2022

the Three Months Ended March 31, 2024 and 2023

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

14 unchanged sentences

Harrow also owns royalty rights in various drug candidates being developed by Surface

September 29, 2023, the Company changed its corporate name from Harrow Health, Inc.

to Harrow, Inc.

pursuant to a Certificate of Amendment

to the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware.

of Presentation

7 unchanged sentences

adjustments) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended September

Operating results for the three months ended March 31,

2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

11 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

following represents an update for the three and nine months ended September 30, 2023 to the significant accounting policies described

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

following represents an update for the three months ended March 31, 2024 to the significant accounting policies described in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2023.

Uncertainties and Liquidity

4 unchanged sentences

of operations.

Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables.

Management considers historical collection rates, the current financial status of the Company’s customers, macroeconomic factors,

and other industry-specific factors when evaluating for current expected credit losses.

Forward-looking information is also considered

in the evaluation of current expected credit losses.

However, because of the short time to the expected receipt of accounts receivable,

management believes that the carrying value, net of expected losses, approximates fair value and therefore, relies more on historical

and current analysis of such financial instruments, including its trade receivables.

determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of

customer at the business component level, as management determined that risk profile of the Company’s customers is consistent based

on the type and industry in which they operate, mainly in the pharmaceuticals industry.

Each business component is analyzed for estimated

credit losses individually.

In doing so, the Company establishes a historical loss matrix, based on the previous collections of accounts

receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available.

Further, the Company considers macroeconomic factors and the status of the pharmaceuticals industry to estimate if there are current

expected credit losses within its trade receivables based on the trends of the Company’s expectation of the future status of such

economic and industry-specific factors.

Also, specific allowance amounts are established based on review of outstanding invoices to record

the appropriate provision for customers that have a higher probability of default.

accounts receivable balance on the Company’s condensed consolidated balance sheet as of September 30, 2023 was $ 18,468,000 , net

of $ 108,000 of allowances.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized

cost basis of accounts receivable to present the net amount expected to be collected at September 30, 2023:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

Balance at January 1, 2023

Change in expected credit losses

Write-offs, net of recoveries

Balance at September 30, 2023

Combinations and Asset Acquisitions

Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as

a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross

assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction

is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether the Company has acquired

inputs, process, and output, which would meet the requirements of a business.

If determined to be a business combination, the Company

accounts for the transaction under the acquisition method of accounting as indicated in Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”).

805, Business Combinations , requires the acquiring entity in a business combination to recognize the fair value of all assets

acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value

measurement point.

Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including any

contingent assets and liabilities, and any non-controlling interest in the acquiree based on the fair value estimates as of the date

of acquisition.

The Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration

paid over the fair value of the identified net assets acquired.

consideration for the Company’s business acquisitions may include future payments that are contingent upon the occurrence of a

particular event or events.

The obligation for such contingent consideration payments are recorded at fair value on the acquisition date.

The contingent consideration obligations are then evaluated each reporting period.

Changes in the fair value of contingent consideration,

other than changes due to payments, would be recognized as a gain or loss and recorded in the condensed consolidated statement of operations.

determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, Business Combinations – Related

Issues , which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on

the cost to the acquiring entity or a relative fair value basis, which includes transaction costs in addition to consideration given.

No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from

the assets’ carrying amounts on the acquiring entity’s financial statements.

Consideration transferred that is non-cash will

be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of

the assets acquired, and liabilities assumed, whichever is more clearly evident and more reliably measurable.

Goodwill is not recognized

in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable

assets based on relative fair values.

Value Measurements

16 unchanged sentences

would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

September 30, 2023 and December 31, 2022, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a

recurring basis.

The Company’s investment in Eton is classified as Level 1 as the fair value is determined using quoted market

prices in active markets for the same securities.

As of September 30, 2023 and December 31, 2022, the fair market value of the Company’s

investment in Eton was $ 8,265,000 and $ 5,589,000 , respectively.

March 31, 2024 and December 31, 2023, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a recurring

The Company’s investment in Eton is classified as Level 1 as the fair value is determined using quoted market prices in

active markets for the same securities.

As of March 31, 2024 and December 31, 2023, the fair market value of the Company’s investment

in Eton was $ 7,433,000 and $ 8,681,000 , respectively.

The Company sold its remaining interest in April 2024 (see Note 16).

Company’s 2026 Notes (as defined in Note 11) are carried at face value, including the unamortized premium, less unamortized debt

7 unchanged sentences

following table presents the estimated fair values and the carrying values:

SCHEDULE OF ESTIMATED FAIR VALUE

September 30, 2023

OF ESTIMATED FAIR VALUE

March 31, 2024

December 31, 2023

15 unchanged sentences

shares (using the treasury stock method) from stock options, unvested RSUs, unvested PSUs and warrants were 4,318,057 and 4,750,340 at

September 30, 2023 and 2022, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented,

March 31, 2024 and 2023, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented,

because the effect is anti-dilutive.

2 unchanged sentences

The number of shares underlying

vested RSUs at September 30, 2023 and 2022 was 244,352 and 303,454 , respectively.

following table shows the computation of basic net loss per share of common stock for the three and nine months ended September 30, 2023

SCHEDULE OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

vested RSUs at March 31, 2024 and 2023 was 223,928 and 336,264 , respectively.

following table shows the computation of basic net loss per share of common stock for the three months ended March 31, 2024 and 2023:

OF BASIC NET LOSS PER SHARE OF COMMON STOCK

For the Three Months Ended

Numerator – net loss

1 unchanged sentence

$ ( 6,643,000 )

$ ( 15,263,000 )

$ ( 15,141,000 )

Denominator – weighted average number of shares outstanding, basic and diluted

Net loss per share, basic and diluted

Company’s effective tax rate was ( 8.81 ) % and ( 0.50 ) % for the nine months ended September 30, 2023 and 2022, respectively.

Company’s effective tax rate was ( 0.11 )% and 4.16 % for the three months ended March 31, 2024 and 2023, respectively.

The Company’s

effective tax rate for the nine months ended September 30, 2023 and 2022 differs from the U.S.

federal statutory tax rate of 21 % due

to state taxes, permanent book-tax differences related to Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m)

effective tax rate for the three months ended March 31, 2024 and 2023 differs from the U.S.

federal statutory tax rate of 21 % due to

state taxes, permanent book-tax differences related to Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m)

excess officer compensation limitation and share-based compensation and the change in valuation allowance.

Company’s effective tax rate was ( 53.96 ) % and ( 0.54 ) % for the three months ended September 30, 2023, and 2022, respectively.

Company’s effective tax rate for the three months ended September 30, 2023, and 2022 differs from the U.S.

federal statutory tax

rate of 21 % due to state taxes, permanent book-tax differences related to IRC Section 162(m) excess officer compensation limitation and

share-based compensation and change in valuation allowance.

of September 30, 2023 and December 31, 2022, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

of March 31, 2024 and December 31, 2023, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

that would, if recognized, affect the effective tax rate.

in Eton Pharmaceuticals, Inc .

of September 30, 2023, the Company owned 1,982,000 shares of Eton common stock (representing less than 10 % of the equity interests of

Eton as of such date).

At September 30, 2023, the fair market value of Eton’s common stock was $ 4.17 per share.

In accordance with

ASC 321, Investments — Equity Securities , the Company recorded unrealized holding gains (losses) from its Eton common stock

position of $ 1,348,000 and $ 2,676,000 during the three and nine months ended September 30, 2023, respectively, and $ ( 1,031,000 ) and $ ( 4,341,000 )

during the same periods in 2022, respectively, related to the change in fair market value of its investment in Eton during the measurement

As of September 30, 2023, the fair market value of the Company’s investment in Eton was $ 8,265,000 .

in Melt Pharmaceuticals, Inc.

– Related Party

of September 30, 2023, the Company owns 3,500,000 shares of common stock of Melt (representing approximately 36 % of the equity interests

of Melt as of such date).

The Company analyzes its investment in Melt and related agreements on a regular basis to evaluate its position

of variable interests in Melt.

The Company has determined that it does not have the ability to control Melt, however it has the ability

to exercise significant influence over the operating and financial decisions of Melt and uses the equity method of accounting for this

Under this method, the Company recognizes earnings and losses in Melt in its condensed consolidated financial statements

and adjusts the carrying amount of its investment in Melt accordingly.

Any intra-entity profits and losses are eliminated.

year ended December 31, 2021, the Company reduced the carrying value of its common stock investment in Melt to $ 0 as a result of the

Company recording its share of equity losses in Melt since its deconsolidation in 2019.

As of September 30, 2023, and at the time of

entering into the Melt Loan Agreement (see Note 5), the Company owned 100 % of Melt’s indebtedness.

Following the reduction of the

carrying value of the Company’s common stock investment in Melt to $ 0 , the Company began recording 100 % of the equity method losses

of Melt, based on its ownership of Melt’s total indebtedness.

In addition, the Company treats interest paid in kind on the Melt

Loan Agreement as an in-substance capital contribution and reduces its investment in Melt accordingly, rather than recording interest

The Company has no other requirements to advance funds to Melt.

following table summarizes the Company’s investments in Melt as of September 30, 2023:

Company owns 3,500,000

shares of common stock and 2,334,256

shares of preferred stock of Melt (representing in aggregate approximately 46 %

of Melt’s equity interests as of March 31, 2024).

The Company analyzes its investment in Melt and related agreements on a

regular basis to evaluate its position of variable interests in Melt.

The Company has determined that it does not have the ability

to control Melt, however it has the ability to exercise significant influence over the operating and financial decisions of Melt and

uses the equity method of accounting for this investment.

Under this method, the Company recognizes its portion of earnings and

losses in Melt in its consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly.

intra-entity profits and losses are eliminated.

a quarterly basis, management assesses whether there are any indicators that the carrying value of the Company’s equity method

investments may be other than temporarily impaired.

Indicators include financial condition, operating performance, and near-term prospects

of the investee.

To the extent indicators suggest that a loss in value may have occurred, the Company will evaluate both quantitative

and qualitative factors to determine if the loss in value is other than temporary.

If a potential loss in value is determined to be other

than temporary, the Company will recognize an impairment loss based on the estimated fair value of the equity method investments.

Company has no other investments other than its common stock and preferred stock positions in Melt and no other requirements to advance

funds to Melt.

following table summarizes the Company’s investments in Melt as of March 31, 2024:

SCHEDULE OF INVESTMENT

Share of Equity Method

In-substance Capital

Contributions

$ ( 5,810,000 )

Note receivable

( 13,500,000 )

( 4,265,000 )

Preferred stock

( 18,397,000 )

1 unchanged sentence

Note 4 for more information and related party disclosure regarding Melt.

in Surface Ophthalmics, Inc.

– Related Party

of September 30, 2023, the Company owned 3,500,000 common shares of Surface (representing approximately 20 % of the equity interests of

Surface as of such date) and uses the equity method of accounting for this investment, as management has determined that the Company

has the ability to exercise significant influence over the operating and financial decisions of Surface.

Under this method, the Company

recognizes earnings and losses in Surface in its condensed consolidated financial statements and adjusts the carrying amount of its investment

in Surface accordingly.

The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface.

Any intra-entity profits and losses are eliminated.

During the year ended December 31, 2021, the Company reduced its common stock investment

in Surface to $ 0 as a result of the Company recording its share of equity losses of Surface.

The Company has no other investments in

Surface and no other requirements to advance funds to Surface.

following table summarizes the Company’s investment in Surface as of September 30, 2023:

SCHEDULE OF INVESTMENT

Share of Equity

Method Losses

$ ( 5,320,000 )

Note 6 for more information and related party disclosure regarding Surface.

Adopted Accounting Pronouncements

September 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and

requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial

instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for

the Company for the fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on January 1, 2023.

composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions

and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated

financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of September 30, 2023, using

its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect

adjustment to accumulated deficit on the adoption date of the standard.

Guidance Issued but Not Adopted at September 30, 2023

August 2023, FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial

Measurement , which applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture)

and requires joint ventures to initially measure all contributions received upon formation at fair value.

The new guidance does not impact

accounting by the venturers.

The new guidance is applicable to joint venture entities with a formation date on or after January 1, 2025

on a prospective basis.

Joint ventures formed prior to the effective date may elect to apply the new guidance retrospectively back to

their original formation date.

We will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the definition

of a joint venture.

Company accounts for contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers .

The Company has

three primary streams of revenue:

(1) revenue recognized from sales of products through its pharmacy and outsourcing facility and sales

of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from a commission

agreement with a third party, and (3) revenue recognized from intellectual property licenses and asset purchase agreements.

Guidance Issued but Not Adopted at March 31, 2024

August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05,

Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement , which applies to

the formation of entities that meet the definition of a joint venture (or a corporate joint venture) and requires joint ventures to initially

measure all contributions received upon formation at fair value.

The new guidance does not impact accounting by the venturers.

guidance is applicable to joint venture entities with a formation date on or after January 1, 2025 on a prospective basis.

Joint ventures

formed prior to the effective date may elect to apply the new guidance retrospectively back to their original formation date.

will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the definition of a joint venture.

October 2023, FASB issued ASU 2023-06, Disclosure Improvements—Codification Amendments in Response to the SEC’s Disclosure

Update and Simplification Initiative .

This ASU modifies the disclosure or presentation requirements of a variety of topics in the

codification by aligning them with the SEC’s regulations.

The amendments to the various topics should be applied prospectively,

and the effective date for the Company for each amendment will be determined based on the effective date of the SEC’s removal of

the related disclosure from Regulation S-X or Regulation S-K.

If the SEC has not removed the applicable requirement by June 30, 2027,

then the related amendment in ASU 2023-06 will be removed from the codification and will not become effective.

Early adoption of this

ASU is prohibited.

The Company does not expect the amendments in this ASU to have a material impact on the disclosures or presentation

in its consolidated financial statements.

November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures , which

enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements.

ASU 2023-07 is effective for the Company in our annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal

2025 on a retrospective basis, with all required disclosures to be made for all prior periods presented in the consolidated financial

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial

December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures , which enhances the

disclosures required for income taxes in the Company’s annual consolidated financial statements.

Notably, this ASU requires entities

to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that

meet a quantitative threshold.

ASU 2023-09 is effective for the Company in its annual reporting for fiscal year 2025 on a prospective

Early adoption and retrospective reporting are permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its

consolidated financial statements.

Reclassifications

prior period items and amounts have been reclassified to conform to the classifications used to prepare the condensed consolidated financial

statements for the current period.

These reclassifications had no material impact on the Company’s condensed consolidated financial

position, results of operations, or cash flows as previously reported.

Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers .

has three primary streams of revenue:

(1) product revenues, including revenue recognized from sales of products through its pharmacy

and outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2)

revenue recognized from transfer of acquired product sales and profits in 2023, and (3) revenue recognized from intellectual property

licenses and related arrangements.

Company sells prescription medications directly through its pharmacy, outsourcing facility and 3PL partner.

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The transaction price is based on an amount that reflects the consideration to which the Company expects

to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales

deductions) and an estimate for returns and replacements established at the time of sale.

The Company utilizes the services of a

third-party professional services firm to estimate rebates and chargebacks associated with sales of its branded products.

of promised goods is satisfied within a year, and therefore there are no significant financing components.

There is no non-cash consideration

related to product sales.

to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts, copay assistance and other deductions (collectively,

sales deductions) and an estimate for returns and replacements established at the time of sale.

The Company utilizes the services

of a third-party professional services firm to estimate rebates and chargebacks associated with sales of its branded products.

transfer of promised goods is satisfied within a year, and therefore there are no significant financing components.

There is no non-cash

consideration related to product sales.

the transaction price to the performance obligations in the contract:

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occurs at delivery.

Company had entered into an agreement whereby it was paid a fee calculated based on sales the Company generates from a pharmaceutical

product that is owned by a third party.

The revenue earned from this arrangement was recognized, at which point there was no future performance

obligation required by the Company and no consequential continuing involvement on the Company’s part to recognize the associated

From Transfer of Acquired Product Sales and Profits

11 unchanged sentences

The estimated

Chargebacks are recorded as a reduction in revenues from transfer of acquired product sales and profits in the Company’s condensed

consolidated statements of operations, and recorded as a reduction to accounts receivable in the condensed consolidated balance sheets,

at the time the revenue is recognized.

Property License Revenues

Company currently holds five intellectual property licenses and related agreements pursuant to which the Company has agreed to license

or sell to a customer with the right to access the Company’s intellectual property.

Chargebacks are recorded as a reduction in revenues from transfer of acquired product sales and profits in the Company’s consolidated

statements of operations, and recorded as a reduction to accounts receivable in the consolidated balance sheets, at the time the revenue

is recognized.

Property License and Related Arrangements Revenues

of March 31, 2024, the Company holds five intellectual property licenses and related arrangements pursuant to which the Company has agreed

to license or sell to a customer the right to access the Company’s intellectual property.

License arrangements may consist of non-refundable

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recognized on a straight-line basis over the applicable term.

disaggregated by revenue source for the three and nine months ended September 30, 2023 and 2022 consisted of the following:

disaggregated by revenue source for the three months ended March 31, 2024 and 2023 consisted of the following:

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales, net

Commission revenues

Transfer of acquired product sales/profit

Other revenues (including transfer of acquired product sales/profit)

Total revenues

revenue and customer deposits at September 30, 2023 and December 31, 2022 were $ 153,000 and $ 113,000 , respectively.

All deferred revenue

and customer deposit amounts at December 31, 2022 were recognized as revenue during the nine months ended September 30, 2023.

RECENT PRODUCT ACQUISITIONS, LICENSES AND DIVESTITURES

of VEVYE TM U.S.

and Canadian Commercial Rights

July 2023, the Company acquired commercial rights of VEVYE (cyclosporine ophthalmic solution) 0.1 %, an ophthalmic drug product, for the

and Canadian markets (the “VEVYE Acquisition”).

The Company acquired the commercial rights to VEVYE by entering into

a license agreement with Novaliq GmbH (“Novaliq”).

As consideration, the Company made initial payments to Novaliq totaling

$ 8,000,000 and will pay low double-digit royalties on net sales of VEVYE along with potential commercial milestone payments.

Company accounted for the VEVYE Acquisition as an acquisition of assets and capitalized the initial payments of $ 8,000,000 and costs

of $ 70,000 associated with the transaction.

of Certain U.S.

and Canadian Commercial Rights to Santen and Eyevance Products

July 2023, the Company entered into an Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen

(collectively, the “Santen Agreements”), each a subsidiary of Santen Pharmaceuticals Co., Ltd.

(collectively, “Santen”).

Pursuant to the Santen Agreements, the Company acquired the exclusive commercial rights to assets associated with the following ophthalmic

products (collectively, the “Santen Products”):

FLAREX, NATACYN, ZERVIATE, VERKAZIA and FRESHKOTE in the US, and VERKAZIA

and CATIONORM PLUS in Canada.

transactions pursuant to the Santen Agreements are referred to in these notes as the “Santen Products Acquisition.”

the terms of the Santen Agreements, the Company made an initial one-time payment of $ 8,000,000 .

In addition, the Santen Agreements provide

for various one-time contingent milestone payments associated with certain manufacturing-related events as well as low-double digit royalty

payments on net sales of VERKAZIA and high-single digit royalty payments on net sales of CATIONORM PLUS.

Under the Santen Agreements,

the Company also assumed certain obligations associated with other third parties that require mid-single digit royalties on sales of

FRESHKOTE and ZERVIATE.

Immediately following the closing and subject to certain conditions, prior to the transfer of the Santen Products

new drug applications (“NDAs”) and other marketing authorizations to the Company, Santen continued to sell the Santen Products

on the Company’s behalf and transfer the net profit from the sale of the Santen Products to the Company.

See Note 18 regarding

the transfer of certain marketing authorizations of the Santen Products.

assets acquired in the Santen Products Acquisition are identifiable intangible asset groups in similar asset classes and all directly

related to the product NDAs and marketing authorizations acquired.

The developed technology is within one major intangible asset class.

No workforce/employees were included in the Santen Products Acquisition and the Company is required to utilize its own business inputs/processes

to transfer and commercialize the Santen Products.

Company incurred $ 139,000 in costs associated with the Santen Products Acquisition, and including such acquisition costs, the payment

of $ 8,000,000 at closing and a near term milestone of $ 500,000 .

The total purchase price of the Santen Products Acquisition was $ 8,639,000

and was accounted for as an asset acquisition.

At the time of the Santen Products Acquisition and as of September 30, 2023, the remaining

contingent consideration due was not considered probable and reasonably estimable and therefore, no amount was included in the purchase

price of the Santen Products Acquisition.

At the time the contingent consideration due becomes probable and reasonably estimable the

additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their initial estimated fair

values as a percent of the total purchase price.

of ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE

December 2022, the Company entered into an Asset Purchase Agreement (the “Fab 5 APA”) with Novartis Technology, LLC and Novartis

Innovative Therapies AG (together, “Novartis”), pursuant to which the Company agreed to purchase from Novartis the exclusive

commercial rights to assets associated with the following ophthalmic products (collectively the “Fab 5 Products”) in the

(the “Fab 5 Acquisition”):

ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE.

the terms of the Fab 5 APA, the Company made a one-time payment of $ 130,000,000 at closing in January 2023, with up to another $ 45,000,000

due in a milestone payment related to the timing of the commercial availability of TRIESENCE.

Pursuant to the Fab 5 APA and various ancillary

agreements, immediately following the closing and subject to certain conditions and prior to the transfer of the Fab 5 Products NDAs

to the Company, Novartis will continue to sell the Fab 5 Products on the Company’s behalf and transfer the net profit from the

sale of the Fab 5 Products to the Company.

Novartis has agreed to supply certain Fab 5 Products to the Company for a period of time after

the NDAs are transferred and to assist with technology transfer of the Fab 5 Products manufacturing to other third-party manufacturers,

assets acquired in the Fab 5 Acquisition are identifiable intangible asset groups in similar asset classes and all directly related to

the five product NDAs acquired.

The developed technology is within one major intangible asset class.

No workforce/employees were included

in the Fab 5 Acquisition and the Company is required to utilize its own business inputs/processes to transfer and commercialize the Fab

5 Products and NDAs.

Company incurred $ 558,000 in costs associated with the Fab 5 Acquisition and including such acquisition costs and the payment of $ 130,000,000

The total purchase price of the Fab 5 Acquisition was $ 130,558,000 and was accounted for as an asset acquisition.

time of the Fab 5 Acquisition and as of September 30, 2023, the contingent consideration due related to the commercial availability of

TRIESENCE was not considered probable and reasonably estimable and, therefore, no amount was included in the purchase price of the Fab

5 Acquisition.

At the time the contingent consideration due related to the commercial availability of TRIESENCE becomes probable and

reasonably estimable the additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their

initial estimated fair values as a percent of the total purchase price.

The Company does not consider any amounts related to TRIESENCE

to be in-process research and development (IPR&D) as considered within the scope of ASC 730, Research and Development .

of Non-Ophthalmic Assets

October 2022, wholly-owned subsidiaries of the Company (collectively, “Imprimis”) entered into an Asset Purchase Agreement

(the “RPC Agreement”) with Innovation Compounding Pharmacy, LLC (the “Buyer”).

Under the terms of the RPC Agreement,

Imprimis agreed to sell substantially all of its assets associated with its non-ophthalmology related compounding product line, including

but not limited to, certain intellectual property rights, customer lists, databases, and formulations (the “RPC Assets”).

The Buyer agreed to make offers of employment to nine of the Company’s employees that were responsible for the sales activities

associated with the RPC Assets.

Under the terms of the RPC Agreement, the Buyer paid Imprimis an aggregate cash amount of $ 6,000,000

in October 2022.

In addition, the Buyer is obligated to pay up to $ 4,500,000 to Imprimis based on mutually agreed upon revenue milestones

during the calendar year 2023 (the “Contingent Amount”).

During the year ended December 31, 2022, no amount related to the

Contingent Amount was recognized by the Company.

The Company will recognize a gain related to the Contingent Amount if/when the contingency

(in this case, revenue thresholds for 2023) become likely and reasonably estimable.

connection with the RPC Agreement, Imprimis entered into a separate transition services agreement (the “RPC TSA”) with the

Buyer related to providing ongoing services associated with the RPC Assets, such as procuring and dispensing prescription orders, providing

accounting and billing services and collecting accounts receivable.

Imprimis provided transition services to the Buyer for approximately

nine months following the effective date of the RPC Agreement and expects to wind down transition services in subsequent periods.

Company collected and will continue to collect cash on behalf of the Buyer for revenue generated by sales of RPC Assets from October

2022 through the transition period and the Company is obligated to transfer cash generated by such sales to the Buyer.

The Company’s

condensed consolidated balance sheet as of September 30, 2023 includes accounts receivable of $ 59,000 for cash to be collected on behalf

of the Buyer for sales of RPC Assets sold through September 30, 2023.

were no amount due from the Buyer for reimbursement of services performed under the RPC TSA as of September 30, 2023.

The receivable

amount of $ 59,000 was additionally recorded

within accrued expenses on the condensed consolidated balance sheet as of September 30, 2023, and represents a payable to the Buyer.

The Company recorded a loss from the RPC TSA and disposition and sale of certain related assets and unusable inventory of $ 159,000

and $ 330,000 during the three and nine months ended

September 30, 2023, respectively, which is presented in other expense, net on the condensed consolidated statements of

revenue and customer deposits at March 31, 2024 and December 31, 2023 were $ 112,000 and $ 75,000 , respectively.

All deferred revenue and

customer deposit amounts at December 31, 2023 were recognized as revenue during the three months ended March 31, 2024.

INVESTMENT IN, AND NOTE RECEIVABLE FROM MELT PHARMACEUTICALS, INC.

- RELATED PARTY TRANSACTIONS

December 2018, the Company entered into an asset purchase agreement (the “Melt APA”) with Melt.

December 2018, the Company entered into an Asset Purchase Agreement with Melt (the “Melt APA”).

Pursuant to the terms of

3 unchanged sentences

while any patent rights remain outstanding, as well as other conditions.

February 2019, the Company entered into a Management Service Agreement with Melt (the “Melt MSA”), whereby the Company provided

to Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and

Melt was required to pay the Company a monthly amount of $ 10,000 .

February 2019, the Company entered into a Management Services Agreement (the “Melt MSA”), whereby the Company provided to

Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and Melt

was required to pay the Company a monthly amount of $ 10,000 .

The Melt MSA was terminated effective July 1, 2023.

During the three

and nine months ended September 30, 2023 and 2022, the Company recorded $ 0 and $ 89,000 , and $ 30,000 and $ 100,000 , respectively, due from

Melt for reimbursable expenses and amounts payable pursuant to the Melt MSA, which are included in prepaid expenses and other current

assets in the accompanying condensed consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the Company was due

$ 228,000 and $ 139,000 , respectively, from Melt for reimbursable expenses and amounts due under the Melt MSA.

The Company made a cash

advance to Melt of $ 500,000 and Melt repaid the $ 500,000 cash advance during the nine months ended September 30, 2023.

the nine months ended September 30, 2023, Melt sold approximately 2,000,000 shares of its Series B Preferred Stock and raised over $ 17,000,000

in gross proceeds from third party investors.

During the three months

ended March 31, 2024 and 2023, the Company recorded $ 0 and $ 59,000 , respectively, due from Melt for reimbursable expenses and amounts

payable pursuant to the Melt MSA, which are included in prepaid expenses and other current assets in the accompanying condensed consolidated

balance sheets.

As of March 31, 2024 and December 31, 2023, the Company was due $ 228,000 , from

Melt for reimbursable expenses and amounts due under the Melt MSA

March 2024, Melt completed its Series B Preferred Stock financing which raised gross proceeds of approximately $ 23,900,000 .

Company’s Chief Executive Officer, Mark L.

9 unchanged sentences

OF CONDENSED INCOME STATEMENT

For the Nine Months Ended

September 30,

Revenues, net

Loss from operations

$ ( 3,663,000 )

$ ( 9,064,000 )

$ ( 5,407,000 )

$ ( 10,562,000 )

the Three Months Ended

from operations

unaudited condensed balance sheet information of Melt is summarized below:

OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

2 unchanged sentences

Total liabilities

Total preferred stock and stockholders’ deficit

( 7,691,000 )

( 18,294,000 )

Total liabilities and stockholders’ deficit

Note Receivable

September 1, 2021, the Company entered into a loan and security agreement in the principal amount of $ 13,500,000 (the “Melt Loan

Agreement”), as lender, with Melt, as borrower.

Amounts borrowed under the Melt Loan Agreement bear interest at 12.50 % per annum,

which interest can be paid in-kind at the option of Melt until the maturity date.

The Melt Loan Agreement permits Melt to pay interest

only on the principal amount loaned thereunder through the term and all amounts owed were previously due and payable on September 1,

In April 2022, the Company entered into a First Amendment and in September 2022, a Second Amendment (together, the “Amendments”)

to the Melt Loan Agreement.

The Amendments (i) extended the maturity date of the Melt Loan Agreement to September 1, 2023, which can

be extended further to September 1, 2026 upon Melt completing a qualifying financing of a minimum amount of $ 10,000,000 from third-party

investors, (ii) added conditions related to minimum cash amounts following a qualifying financing, and (iii) clarified the definition

of material adverse effects.

Melt may elect to prepay all, but not less than all, of the amounts owed prior to the maturity date at any

time without penalty.

has granted the Company a security interest in substantially all of its personal property, rights and assets, including intellectual

property rights, to secure the payment of all amounts owed under the Melt Loan Agreement.

The Melt Loan Agreement contains customary

representations, warranties and covenants, including covenants by Melt limiting additional indebtedness, liens, mergers and acquisitions,

dispositions, investments, distributions, subordinated debt, and transactions with affiliates.

The Melt Loan Agreement includes customary

events of default, and upon the occurrence of an event of default (subject to cure periods for certain events of default), all amounts

owed by Melt thereunder may be declared immediately due and payable by the Company, and the interest rate on the loan may be increased

by 3 % per annum.

The Melt Loan Agreement is currently in default due to non-payment on September 1, 2023.

The Company and Melt are involved

in ongoing discussions to resolve the default.

connection with the Melt Loan Agreement, the Company and Melt entered into a Right of First Refusal Agreement providing the Company with

the right, but not the obligation, to match any offer received by Melt associated with the commercial rights to any of Melt’s drug

candidates for a period of five years following the effective date of the Melt Loan Agreement.

net funds received by Melt excluded $ 908,000 owed to the Company for reimbursable expenses and amounts due under the Melt MSA prior to

the effective date of the note receivable.

As of September 30, 2023 and December 31, 2022, aggregate principal and accrued interest payable

to the Company pursuant to the Melt Loan Agreement amounted to $ 17,765,000 and $ 15,984,000 , respectively.

In accordance with ASC 323,

Investments – Equity Method and Joint Ventures , the carrying amount of the note receivable has been reduced by the Company’s

allocated share of Melt’s losses based on its ownership of Melt’s total indebtedness (see Note 2).

INVESTMENT IN SURFACE OPHTHALMICS, INC.

- RELATED PARTY TRANSACTIONS

Company entered into an asset purchase and license agreement with Surface in 2017 and amended it in April 2018 (together, the “Surface

License Agreements”).

Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain

intellectual property and related rights associated with Surface’s drug candidates (collectively, the “Surface Products”).

Surface is required to make mid-single digit royalty payments to the Company on net sales of the Surface Products while any patent rights

remain outstanding.

of September 30, 2023, the Company owned 3,500,000 shares of Surface common stock.

Sternberg, a director of the Company, is

a director of Surface.

Baum, who is the Company’s Chief Executive Officer, was previously a member of the Surface board

of directors and resigned from his position as a director of Surface on March 31, 2023.

unaudited condensed results of operations information of Surface is summarized below:

OF CONDENSED INCOME STATEMENT

For the Nine Months Ended

September 30,

Revenues, net

Loss from operations

$ ( 4,723,000 )

$ ( 5,338,000 )

$ ( 4,463,000 )

$ ( 5,338,000 )

unaudited condensed balance sheet information of Surface is summarized below:

OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

Current assets

Non-current assets

Total liabilities

Total preferred stock and stockholders’ equity

2 unchanged sentences

products, including those held at the Company’s 3PL partner, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories as of September 30, 2023 and December 31, 2022 was as follows:

The composition of inventories as of March 31, 2024

and December 31, 2023 was as follows:

OF INVENTORIES

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets at September 30, 2023 and December 31, 2022 consisted of the following:

expenses and other current assets at March 31, 2024 and December 31, 2023 consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

September 30, 2023

March 31, 2024

December 31, 2023

1 unchanged sentence

Prepaid computer software licenses and related expenses

Due from Melt Pharmaceuticals

Other prepaid expenses

Prepaid Prescription Drug User fees

Receivable due from Melt

Prepaid FY 2024 Prescription Drug User (“PDUFA”) fees

Deferred Oaktree Loan commitment fee

Deposits and other current assets

1 unchanged sentence

PROPERTY, PLANT AND EQUIPMENT

plant and equipment at September 30, 2023 and December 31, 2022 consisted of the following:

plant and equipment at March 31, 2024 and December 31, 2023 consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

September 30, 2023

December 31, 2022

Property, plant and equipment, net:

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

Property, plant and equipment,

Accumulated depreciation

( 9,804,000 )

plant and equipment, net:

and equipment

and pharmacy equipment

plant and equipment, gross

( 10,072,000 )

plant and equipment, net

the three and nine months ended September 30, 2023, depreciation related to the property, plant and equipment was $ 290,000 and $ 743,000 ,

respectively, compared to $ 171,000 and $ 928,000 during the same periods in 2022, respectively.

the three months ended March 31, 2024 and 2023, depreciation related to the property, plant and equipment was $ 296,000 and $ 225,000 ,

respectively.

CAPITALIZED SOFTWARE COSTS

software costs at September 30, 2023 and December 31, 2022 consisted of the following:

OF FINITE LIVED INTANGIBLE ASSETS

September 30, 2023

software costs at March 31, 2024 and December 31, 2023 consisted of the following:

SCHEDULE OF CAPITALIZED SOFTWARE COSTS

March 31, 2024

December 31, 2023

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( 1,404,000 )

( 1,268,000 )

Capitalized internal-use software in process

Total finite lived intangible

Company recorded amortization expense of $ 115,000 and $ 352,000 related to capitalized software costs during the three and nine months

ended September 30, 2023, respectively, and $ 76,000 and $ 162,000 during the same periods in 2022, respectively.

Total capitalized software costs net

the three months ended March 31, 2024 and 2023, the Company recorded amortization expense related to capitalized software costs of $ 136,000

and $ 67,000 , respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at September 30, 2023 consisted of the following:

OF INTANGIBLE ASSETS

Company’s intangible assets at March 31, 2024 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

Carrying Value

$ ( 169,000 )

Acquired NDAs

Acquired new drug applications (“NDAs”)

( 13,830,000 )

5 unchanged sentences

$ 157,370,000

expense for intangible assets for the three and nine months ended September 30, 2023 and 2022 was as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

expense for intangible assets for the three months ended March 31, 2024 and 2023 was as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Three Months Ended

For the Nine Months Ended

September 30,

Acquired NDAs

1 unchanged sentence

Amortization of intangible

future amortization expense for the Company’s intangible assets at September 30, 2023 was as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Remainder of 2023

future amortization expense for the Company’s intangible assets at March 31, 2024 was as follows:

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Intangible assets

$ 162,435,000

were no changes to the carrying value of the Company’s goodwill during the three and nine months ended September 30, 2023 and 2022.

were no changes to the carrying value of the Company’s goodwill during the three months ended March 31, 2024 and 2023.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at September 30, 2023 and December 31, 2022 consisted of the following:

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts payable

Income tax payable

Accrued insurance premium

Accrued IHEEZO milestone payments

Accrued litigation settlements

Accrued RPC transition payments (see Note 4)

Accrued managed care commercial rebates

Accrued interest (see Note 13)

Accrued exit fee for note payable (see Note 13)

Total accounts payable and accrued expenses

payable and accrued expenses at March 31, 2024 and December 31, 2023 consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

insurance premium

accrued payments

interest (see Note 11)

exit fee for Oaktree Loan (see Note 11)

accounts payable and accrued expenses

current portion

( 24,581,000 )

( 13,771,000 )

Non-current total accrued expenses

Company financed all insurance policies for the policy terms of August 17, 2022 through August 16, 2023 and August 17, 2023 through August

The financing agreements have an interest rate of 4.13 % and 7.48 % per annum, respectively, and require eight monthly payments

of $ 114,000 and nine monthly payments of $ 169,000 , respectively.

total accrued expenses

Company financed all insurance policies for the policy term of August 2023 through August 2024.

The financing agreement has an interest

rate of 7.48 % per annum and requires nine monthly payments of $ 150,000 , of which we have three payments remaining as of March 31, 2024.

Loan Due 2026

3 unchanged sentences

Upon entering into the Oaktree Loan, the Company drew a principal amount of

$ 65,000,000 (“Tranche A”) from the Oaktree Loan and used the net proceeds to repay all amounts owed by the Company pursuant

to the Loan and Security Agreement the Company previously entered into with B.

Riley Commercial Capital, LLC on December 14, 2022 (the

Riley Loan”) – see subheading B.

Riley Loan and Security Agreement – Paid in Full within this Note

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche B”) will be made

available to the Company upon the commercialization of TRIESENCE.

If Tranche B is not drawn by the Company on or before March 27, 2024,

the amount available under Tranche B will be decreased to $ 30,000,000 .

Oaktree Loan is secured by nearly all of the assets, including intellectual property, of the Company and its material subsidiaries.

Oaktree Loan has a maturity date of January 19, 2026 and carries an interest rate equal to the Secured Overnight Financing Rate plus

6.5 % per annum (totaling 11.90 % at September 30, 2023).

From proceeds, the Company paid fees, and offering expenses, and the Oaktree

Loan was issued at an original issue discount of $ 3,415,000 , in aggregate.

The Oaktree Loan also carries an exit fee equal to 3.5 % of

the aggregate principal amount owed and the Company accrued $ 2,275,000 related to the exit fee.

The original issue discount, fees and

expenses (including the exit fee) are being amortized over the term of the Oaktree Loan using the effective interest rate method.

Oaktree Loan requires quarterly interest-only payments with all of the unpaid principal, interest and fees due on the maturity date,

January 19, 2026.

July 2023, the Company entered into the First Amendment to Credit Agreement and Guaranty and Consent (the “Oaktree Amendment”)

to the Oaktree Loan.

Under the Oaktree Amendment, the overall credit facility size was increased from $ 100,000,000 to $ 112,500,000 , and

the Company made other changes related to the Santen Products Acquisition (see Note 4).

Upon satisfaction of certain conditions to funding,

the Company drew down a principal amount of $ 12,500,000 (the “Loan Increase”) to fund the initial one-time payment associated

with the Santen Products Acquisition and for other working capital and general corporate purposes.

No other material changes to the Oaktree

Loan were made pursuant to the Oaktree Amendment.

Following entry into the Oaktree Amendment and the funding of the Loan Increase upon

closing of the Santen Products Acquisition, the Company has drawn down a total principal loan amount of $ 77,500,000 under the Oaktree

Loan and an additional principal loan amount of up to $ 35,000,000 remains available to the Company upon the commercialization of TRIESENCE.

The Oaktree Loan exit fee was increased from $ 2,275,000 to $ 2,713,000 pursuant to the Oaktree Amendment.

The exit fee is equal to 3.50 %

of the amended aggregate principal amount owed and the Company accrued an additional $ 438,000 in the three months ended September 30,

2023 related to the exit fee.

Oaktree Loan contains customary guarantees and covenants, including financial covenants related to minimum liquidity and minimum net

At September 30, 2023, the Company was in compliance with these covenants.

As of the end of the fiscal quarter ending

December 31, 2024, if the Company’s Total Leverage Ratio (as defined in the Oaktree Loan) is greater than or equal to five

times, but less than seven times, the Company will be required to issue to Oaktree warrants to purchase 375,000

shares of the Company’s common stock, and if the Total Leverage Ratio is greater than or equal to seven times, the Company

will be required to issue to Oaktree warrants to purchase an additional 375,000

shares of the Company’s common stock (equaling 750,000

shares in aggregate).

If the Total Leverage Ratio as of the end of the fiscal quarter ending December 31, 2024 is less than five

times, no warrants will be issued to Oaktree.

Based on current projections, the Company does not expect to issue any warrants

related to the Oaktree Loan.

expense related to the Oaktree Loan totaled $ 2,995,000 and $ 5,660,000 for the three and nine months ended September 30, 2023, respectively,

$ 65,000,000 .

In July 2023, the Company drew an additional principal amount of $ 12,500,000 and entered into the First Amendment to the

Oaktree Loan (the “Oaktree Amendment”).

Under the Oaktree Amendment, the overall credit facility size was increased from

$ 100,000,000 to $ 112,500,000 .

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche

B”) is made available to the Company upon the commercialization of TRIESENCE.

Since Tranche B was not drawn by the Company on or

before March 27, 2024, the amount available under Tranche B decreased to $ 30,000,000 .

While undrawn, the Company is required to pay a

commitment fee related to the Tranche B amount equal to 2 % per annum, payable quarterly.

This fee is recorded within prepaid expenses

and other current assets and is being amortized on a straight-line basis over the access period.

expense related to the Oaktree Loan totaled $ 2,953,000 and $ 95,000 for the three months ended March 31, 2024 and 2023, respectively,

and included the amortization of debt issuance costs and discount of $ 603,000 and $ 12,000 , respectively.

– 11.875% Senior Notes Due 2027

December 2022 and in January 2023, the Company closed an offering of $ 35,000,000 and $ 5,250,000 , respectively, aggregate principal amount

of 11.875 % senior notes due in December 2027 (the “2027 Notes”).

The 2027 Notes were sold to investors at a par value of

$ 25.00 per 2027 Note, and the offering resulted in net proceeds to the Company of approximately $ 36,699,000 after deducting underwriting

discounts and commissions and other offering expenses of $ 3,551,000 .

2027 Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other

existing and future senior unsecured and unsubordinated indebtedness.

The 2027 Notes are effectively subordinated in right of payment

to all of the Company’s existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness

of the Company’s subsidiaries, including trade payables.

The 2027 Notes bear interest at the rate of 11.875 % per annum.

on the 2027 Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on January

The 2027 Notes will mature on December 31, 2027 .

any time prior to December 31, 2024, the Company may, at its option, redeem the 2027 Notes, in whole at any time or in part from time

to time, at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus a make-whole amount, if any,

plus accrued and unpaid interest to, but excluding, the date of redemption.

The Company may redeem the 2027 Notes for cash in whole or

in part at any time at its option (i) on or after December 31, 2024 and prior to December 31, 2025, at a price equal to $25.50 per note,

plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after December 31, 2025 and prior to December

31, 2026, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii)

on or after December 31, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest

to, but excluding, the date of redemption.

In addition, the Company is required to redeem the 2027 Notes, for cash, in whole but not

in part, at the price of $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, upon occurrence

of certain events including the occurrence of a Material Change, as defined in the Second Supplemental Indenture.

The 2027 Notes trade

on the Nasdaq Stock Market LLC under the symbol “HROWM.”

expense related to the 2027 Notes totaled $ 1,375,000 and $ 4,141,000 for the three and nine months ended September 30, 2023, respectively,

and included amortization of debt issuance costs and debt discount of $ 180,000 and $ 556,000 , respectively.

Chief Executive Officer, Mark L.

Baum, Chief Financial Officer, Andrew R.

Boll, and former directors R.

Lawrence Van Horn and Dr.

Lindstrom, in the aggregate, purchased $ 950,000 in principal amount of the 2027 Notes at the time of their offering.

December 2022 and in January 2023, the Company closed offerings of $ 40,250,000 aggregate principal amount of 11.875 % senior notes due

December 2027 (the “2027 Notes”).

Interest expense related to the 2027 Notes totaled

$ 1,373,000 and $ 1,395,000 for the three months ended March 31, 2024 and 2023, respectively, and included the amortization of debt issuance

costs and discount of $ 178,000 and $ 200,000 , respectively.

– 8.625% Senior Notes Due 2026

April 2021, the Company closed an offering of $ 50,000,000 aggregate principal amount of 8.625 % senior notes due April 2026, and in May

2021 issued an additional $ 5,000,000 of such notes pursuant to the full exercise of the underwriters’ option to purchase additional

notes (collectively, the “April Notes”).

The April Notes were sold to investors at a par value of $ 25.00 per April Note and

the offering resulted in net proceeds to the Company of approximately $ 51,909,000 after deducting underwriting discounts and commissions

and other offering expenses of $ 3,091,000 .

In September 2021, in a further issuance of the April Notes, the Company sold an additional

$ 20,000,000 aggregate principal amount of such notes (the “September Notes,” and together with the April Notes, the “2026

Notes”), at a price of $ 25.75 per September Note, with interest of $ 278,000 on the September Notes being accrued from April 20,

2021, the date of issuance of the April Notes.

The September offering resulted in net proceeds to the Company of approximately $ 19,164,000

after deducting underwriting discounts and commissions and other offering expenses of $ 1,158,000 and a premium on note issuance of $ 322,000 .

The September Notes are treated as a single series with the April Notes under the indenture governing the April Notes, dated as of April

20, 2021, and have the same terms as the April Notes (other than the initial offering price and issue date).

The 2026 Notes are senior

unsecured obligations of the Company and rank equally in right of payment with all of our other existing and future senior unsecured

and unsubordinated indebtedness.

The 2026 Notes are effectively subordinated in right of payment to all of the Company’s existing

and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries,

including trade payables.

The 2026 Notes bear interest at a rate of 8.625 % per annum.

Interest on the 2026 Notes is payable quarterly

in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31, 2021.

The 2026 Notes will mature on April

The issuance costs were recorded as a debt discount and are being amortized as interest expense, net of the amortization of

the premium on note issuance, over the term of the 2026 Notes using the effective interest rate method .

to February 1, 2026, the Company may, at its option, redeem the 2026 Notes, in whole at any time or in part from time to time, at a redemption

price equal to 100% of the principal amount of the 2026 Notes to be redeemed , plus a make-whole amount, if any, plus accrued and unpaid

interest to, but excluding, the date of redemption.

The Company may redeem the 2026 Notes for cash in whole or in part at any time at

our option on or after February 1, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid

interest to, but excluding, the date of redemption.

On and after any redemption date, interest will cease to accrue on the redeemed Notes.

The 2026 Notes trade on the Nasdaq Stock Market LLC under the symbol “HROWL”.

expense related to the 2026 Notes totaled $ 1,814,000 and $ 5,436,000 and $ 1,814,000 and $ 5,436,000 for the three and nine months ended

September 30, 2023 and 2022, respectively, and included amortization of debt issuance costs and discounts of $ 197,000 and $ 585,000 and

$ 197,000 and $ 585,000 for three and nine months ended September 30, 2023 and 2022, respectively.

Riley Loan and Security Agreement – Paid in Full

December 14, 2022 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “BR Loan”)

Riley Commercial Capital, LLC, as administrative agent for the lenders.

The BR Loan provided for a loan facility of up to $ 100,000,000

to the Company with a maturity date of December 14, 2025 (the “Maturity Date”), at an interest rate of 10.875 % per annum.

BR Loan was secured by an intellectual property security agreement entered into in connection with the BR Loan, and by all assets of

the Company and its material subsidiaries.

The outstanding balance of the BR Loan was due in full on the Maturity Date.

The BR Loan provided

for voluntary prepayment subject to no prepayment fee if no loan amount had been funded or the prepayment or repayment occurred (other

than as a result of acceleration of the BR Loan) on or prior to the date that was 90 days following the Effective Date and up to 3.00 %

of the amount of the BR Loan based on other payment dates.

January 2023, $ 59,750,000 of principal amount was funded pursuant to the BR Loan simultaneously with the consummation of the Fab 5 Acquisition

(see Note 4).

In March 2023, the Company repaid all amounts owed under the BR Loan, in connection with the Oaktree Loan, and no exit

or prepayment fees were paid as a result of the payoff of the BR Loan pursuant to a side letter agreement among the parties.

expense related to the BR Loan totaled $ 1,565,000 for the nine months ended September 30, 2023, and included amortization of debt issuance

costs and debt discount of $ 356,000 .

The Company recorded a loss of $ 5,465,000 related to the early extinguishment of debt associated

with the BR Loan.

summary of the Company’s debt at September 30, 2023 and December 31, 2022 is described as follows:

OF LONG TERM DEBT

September 30,

April and September 2021, the Company closed offerings (including an over-allotment exercise in May 2021) of $ 75,000,000 aggregate principal

amount of 8.625 % senior notes due April 2026 (the “2026 Notes”).

In terest expense related

to the 2026 Notes totaled $ 1,812,000 and $ 1,810,000 for the three months ended March 31, 2024 and 2023, respectively, and included amortization

of debt issuance costs and debt discount of $ 195,000 and $ 193,000 , respectively.

summary of the Company’s debt at March 31, 2024 and December 31, 2023 is described as follows:

SCHEDULE OF LONG TERM DEBT

Senior Notes, due April 2026

Senior Notes, due December 2027

Oaktree Loan, due January 2026

Loan, due January 2026

Notes payable gross

Unamortized debt issuance costs

( 10,564,000 )

( 5,826,000 )

Notes payable net

$ 182,186,000

$ 104,174,000

the three and nine months ended September 30, 2023, the total effective interest rate of the Company’s debt was 10.78 %, and 10.91 %,

respectively, and 8.88 % and 8.96 % for the same periods in the prior year, respectively .

September 30, 2023, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

the three months ended March 31, 2024 and 2023, the total effective interest rate of the Company’s debt was 10.78 % .

March 31, 2024, future minimum payments under the Company’s debt were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

Remainder of 2024

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These lease agreements have remaining

terms between one to five years and contain various clauses for renewal at the Company’s option.

terms between one to seven years and contain various clauses for renewal at the Company’s option.

operating lease for 5,789 square feet of office space in Carlsbad, California, which commenced in January 2022 and will expire in

2 unchanged sentences

This includes an amendment, which was made effective July 2020,

that extended the term of the original lease and added 1,400 of additional square footage to the lease, and another amendment entered

into in May 2021 that extended the term of the lease to July 2027 and added 8,900 square feet of space.

that extended the term of the original lease and added 1,400 of additional square footage to the lease, another amendment entered

into in May 2021 that extended the term of the lease to July 2027 and added 8,900 square feet of space, and another amendment entered

into in January 2024 that added 2,861 square feet of space.

operating lease for 5,500 square feet of office space in Nashville, Tennessee, which commenced in January 2020 and will expire in

December 2024 , with an option to extend the term for two additional five-year periods.

The Company does not intend to exercise its

option to extend the term of this lease.

operating lease for 11,552 square feet of lab and office space in Nashville, Tennessee, which commenced in September 2022 and will

expire in September 2027 .

September 30, 2023, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

March 2024, we entered in a new operating lease for 17,625 square feet of office space in Nashville, Tennessee which is expected

to commence in July 2024 and has a seven year term (target expiration date of June 30, 2032 ) with an option to extend the term for

two additional five-year terms.

Once occupied, the Company expects this office space to serve as the Company’s new corporate

headquarters.

Any operating lease right-of-use assets and liabilities related to this lease will be recognized at its commencement

March 31, 2024, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 6.61 % and 11.26 years, respectively.

the three and nine months ended September 30, 2023, cash paid for amounts included for the operating lease liabilities was $ 310,000 and

$ 921,000 , respectively, and $ 249,000 and $ 622,000 during the same periods in 2022, respectively.

During the three and nine months ended

September 30, 2023 and 2022, the Company recorded operating lease expense of $ 309,000 and $ 926,000 and $ 309,000 and $ 809,000 , respectively,

which is included in selling, general and administrative expenses.

lease payments under operating leases as of September 30, 2023 were as follows :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

the three months ended March 31, 2024 and 2023, cash paid for amounts included for the operating lease liabilities was $ 327,000 and $ 306,000 ,

respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded operating lease expense of $ 319,000 and $ 309,000 ,

respectively, which is included in selling, general and administrative expenses.

lease payments under operating leases as of March 31, 2024 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

Operating Leases

7 unchanged sentences

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

July 2023, the Company closed a public offering of shares of its common stock at an offering price of $ 17.75 per share (the “Offering”).

The Company sold 3,887,324 shares of its common stock in the Offering, resulting in the Company receiving aggregate net proceeds of $ 64,520,000 ,

after deducting underwriting discounts and commissions and other offering expenses of $ 4,480,000 .

July 2023, the Company settled 1,567,913 outstanding PSUs as a result of the achievement of the total stockholder returns (“TSR”)

targets set forth in equity incentive awards (the “PSU Agreements”) previously issued to members of the Company’s management

team in 2021 (the “2021 Awards”).

The 2021 Awards were separated into four tranches and required that the Company achieve

and maintain certain levels of TSR ranging from 50 % to 175 % per share during the five-year period following the grant date.

TSR was based

on the aggregate of:

(i) the percent increase of the closing price of the Company’s common stock from July 22, 2021;

dividends or like stockholder distributions as specified in the PSU Agreements.

In connection with the settlement of the 2021 Awards,

an aggregate of 616,984 shares of the Company’s common stock was withheld by Harrow for payroll tax obligations totaling $ 11,273,000 .

the nine months ended September 30, 2023, the Company issued 131,760 shares of its common stock underlying RSUs held by a director that

ceased providing services to the Company.

The RSUs had previously vested, including 13,123 RSUs during the nine months ended September

30, 2023, but the issuance and delivery of the shares were deferred until the director ceased providing services to the Company.

the nine months ended September 30, 2023, the Company issued 61,934 shares of common stock and received proceeds of $ 355,000 upon the

exercise of options to purchase 61,934 shares of common stock with exercise prices ranging from $ 1.70 to $ 8.50 per share.

the nine months ended September 30, 2023, the Company issued 62,367 shares of common stock to Mark L.

Baum, the Company’s Chief

Executive Officer, upon the cashless exercise of options to purchase 180,000 shares at an exercise price of $ 8.99 per share.

withheld from Mr.

Baum 77,167 shares as consideration for the cashless exercise and an additional 40,466 shares for payroll tax obligations

totaling $ 849,000 .

the nine months ended September 30, 2023, the Company issued 55,558 shares of common stock to Andrew R.

Boll, the Company’s Chief

Financial Officer, upon the cashless exercise of options to purchase 90,000 shares at an exercise price of $ 6.00 per share.

withheld from Mr.

Boll 25,521 shares as consideration for the cashless exercise and an additional 8,921 shares for payroll tax obligations

totaling $ 189,000 .

the nine months ended September 30, 2023, upon vesting of 23,000 RSUs granted in January 2020 to Andrew R.

Boll, the Company’s

Chief Financial Officer, the Company issued 13,398 shares of common stock to Mr.

the three months ended March 31, 2024, the Company issued 46,175 shares of common stock and received proceeds of $ 348,000 upon the exercise

of options to purchase 46,175 shares of common stock with exercise prices ranging from $ 6.75 to $ 8.75 per share.

the three months ended March 31, 2024, 45,000 RSUs granted in February 2021 to Andrew R.

Boll, the Company’s Chief Financial Officer,

vested, and 26,520 shares the Company’s common stock were issued to Mr.

Boll, net of 18,480 shares of common stock withheld for

payroll tax withholdings totaling $ 197,000 .

the nine months ended September 30, 2023, upon vesting of 88,000 RSUs granted in January 2020 to Mark L.

Baum, the Company’s Chief

Executive Officer, the Company issued 52,821 shares of common stock to Mr.

Baum, net of 35,179 shares of common stock withheld for payroll

tax withholdings totaling $ 519,000 .

the nine months ended September 30, 2023, 43,130 shares of the Company’s common stock underlying RSUs issued to directors vested,

but the issuance and delivery of these shares were deferred until the applicable director ceased providing services to the Company.

the three months ended March 31, 2024, 150,000 RSUs granted in February 2021 to Mark L.

Baum, the Company’s Chief Executive Officer,

vested, and 90,164 shares the Company’s common stock were issued to Mr.

Baum, net of 59,836 shares of common stock withheld for

payroll tax withholdings totaling $ 638,000 .

the three months ended March 31, 2024, 30,000 RSUs granted in February 2021 to John Saharek, the Company’s Chief Commercial Officer,

vested, and 17,384 shares the Company’s common stock were issued to Mr.

Saharek, net of 12,616 shares of common stock withheld

for payroll tax withholdings totaling $ 135,000 .

the three months ended March 31, 2024, 50,000 RSUs granted in February 2021 to employees, vested, and 32,452 shares the Company’s

common stock were issued, net of 17,548 shares of common stock withheld for payroll tax withholdings totaling $ 187,000 .

the three months ended March 31, 2024, 8,389 shares of the Company’s common stock underlying RSUs issued to directors vested, but

the issuance and delivery of these shares are deferred until the applicable director ceases providing services to the Company.

September 17, 2007, the Company’s Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards

2 unchanged sentences

The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this

however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or

plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or

are otherwise cancelled/forfeited.

On September 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s

2017 Incentive Stock and Awards Plan which was subsequently amended on September 3, 2021 (as amended, the “2017 Plan” and

together with the 2007 Plan, the “Plans”).

As of September 30, 2023, the 2017 Plan provided for the issuance of a maximum

of 6,000,000 shares of the Company’s common stock.

The purposes of the Plans are to attract and retain directors, officers, consultants,

advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest

of such persons in the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive

stock options intended to qualify under Section 422 of the IRC of 1986, as amended, non-qualified stock options, restricted stock units,

performance stock units and restricted stock.

The Plans are administered by the Compensation Committee of the Company’s Board of

The Company had 490,493 shares available for future issuances under the 2017 Plan at September 30, 2023 .

summary of stock option activity under the Plans for the nine months ended September 30, 2023 is as follows:

OF STOCK OPTION PLAN ACTIVITY

On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s

2017 Incentive Stock and Awards Plan which was subsequently amended on June 3, 2021 (as amended, the “2017 Plan” together

with the 2007 Plan, the “Plans”).

As of December 31, 2023, the 2017 Plan provides for the issuance of a maximum of 6,000,000

shares of the Company’s common stock.

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors

and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such

persons in the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive stock

options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted

stock units and restricted stock.

The Plans are administered by the Compensation Committee of the Company’s Board of Directors.

The Company had 400,250 shares available for future issuances under the 2017 Plan at March 31, 2024.

summary of stock option activity under the Plans for the three months ended March 31, 2024 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

Number of Shares

Weighted Average

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life

Aggregate Intrinsic

Aggregate Intrinsic Value

Options outstanding – January 1, 2024

2 unchanged sentences

Options cancelled/forfeited

Options outstanding – September 30, 2023

Options outstanding – March 31, 2024

Options exercisable

2 unchanged sentences

have been received by option holders if all option holders had exercised and immediately sold all shares underlying options with an exercise

price lower than the market price on September 30, 2023, based on the closing price of the Company’s common stock of $ 14.37 on

the nine months ended September 30, 2023, the Company granted stock options to certain employees.

The stock options were granted with

an exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which

price lower than the market price on March 31, 2024, based on the closing price of the Company’s common stock of $ 13.23 on that

the three months ended March 31, 2024, the Company granted stock options to certain employees.

The stock options were granted with an

exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which

the common stock was then listed, at the grant date and have contractual terms of ten years.

Vesting terms for options granted to employees

during the nine months ended September 30, 2023 included the following vesting schedule:

25% of the shares subject to the option vest

and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and

become exercisable quarterly in equal installments thereafter over three years.

Certain option awards provide for accelerated vesting

if there is a change in control (as defined in the Plans) and in the event of certain modifications to the option award agreement.

during the three months ended March 31, 2024 included the following vesting schedule:

25% of the shares subject to the option vest and

become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become

exercisable quarterly in equal installments thereafter over three years.

Certain option awards provide for accelerated vesting if there

is a change in control (as defined in the Plans) and in the event of certain modifications to the option award agreement.

fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model.

19 unchanged sentences

4.06 - 4.21 %

1.54 - 3.19 %

Dividend yield

following table summarizes information about stock options outstanding and exercisable at September 30, 2023:

SCHEDULE OF STOCK

OPTION OUTSTANDING AND EXERCISABLE

following table summarizes information about stock options outstanding and exercisable at March 31, 2024:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding

10 unchanged sentences

$ 1.47 - $ 25.86

of September 30, 2023, there was approximately $ 1,781,000 of total unrecognized compensation expense related to unvested stock options

granted under the Plans.

of March 31, 2024, there was approximately $ 1,815,000 of total unrecognized compensation expense related to unvested stock options granted

under the Plans.

That expense is expected to be recognized over the weighted-average remaining vesting period of 2.81 years.

The stock-based compensation for all stock options was $ 154,000 and $ 617,000 during the three and nine months ended September 30, 2023,

respectively, and $ 241,000 and $ 771,000 during the same periods in 2022, respectively.

intrinsic value of options exercised during the nine months ended September 30, 2023 was $ 4,399,000 .

The stock-based

compensation for all stock options was $ 126,000 and $ 341,000 during the three months ended March 31, 2024 and 2023, respectively.

intrinsic value of options exercised during the three months ended March 31, 2024 was $ 139,000 .

awards are granted subject to certain vesting requirements and other restrictions, including time-based performance and market-based

2 unchanged sentences

common stock on the grant date, is expensed over the vesting period of the RSUs.

the nine months ended September 30, 2023, the Company’s board of directors were granted an aggregate 41,301 time-based vesting

RSUs with a fair market value of $ 800,000 , which vest in equal quarterly installments over one year.

summary of the Company’s RSU activity and related information for the nine months ended September 30, 2023 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

summary of the Company’s RSU activity and related information for the three months ended March 31, 2024 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Number of Shares

2 unchanged sentences

RSUs cancelled/forfeited

RSUs unvested - September 30, 2023

of September 30, 2023, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,041,000 , which is expected

RSUs unvested - March 31, 2024

of March 31, 2024, the total unrecognized compensation expense related to unvested RSUs was approximately $ 859,000 , which is expected

to be recognized over a weighted-average period of 2.2 years, based on estimated and actual vesting schedules of the applicable RSUs.

The stock-based compensation for RSUs during the three and nine months ended September 30, 2023 was $ 374,000 and $ 789,000 , respectively,

and $ 427,000 and $ 1,378,000 during the same periods in 2022, respectively.

April 2023, the Company granted an aggregate of 1,567,913 PSUs to members of its senior management including Mark Baum, Chief Executive

Officer, Andrew Boll, Chief Financial Officer, and John Saharek, Chief Commercial Officer, which are subject to the satisfaction of certain

market-based and continued service conditions (the “2023 PSUs”).

The vesting of the 2023 PSUs require (i) a minimum of a

two-year service period, and (ii) during a five-year term, the achievement and maintenance of Company common stock price targets ranging

between $ 25.00 to $ 50.00 per share, separated into four separate tranches as described further in the table below.

OF PERFORMANCE STOCK UNITS

Number of Shares

Target Share Price*

Share Price assumes that no dividends or like distributions are made to stockholders of the Company.

If such distributions are made,

the Target Share Price would decrease accordingly, to the benefit of the employee, to account for the dividend/distribution as a

part of the Target Share Price.

aggregate fair value of the 2023 PSUs was $ 29,106,000 using a Monte Carlo Simulation with a five-year life, 65 % volatility and a risk

free interest rate of 10.34 %.

This amount is being amortized over a two-year derived service period.

summary of the Company’s PSU activity and related information for the nine months ended September 30, 2023 is as follows:

OF PERFORMANCE STOCK UNITS ACTIVITY

The stock-based compensation for RSUs during the three months ended March 31, 2024 and 2023 was $ 405,000 and $ 29,000 , respectively.

summary of the Company’s PSU activity and related information for the three months ended March 31, 2024 is as follows:

SCHEDULE OF PERFORMANCE STOCK UNITS ACTIVITY

Number of Shares

1 unchanged sentence

PSUs unvested – January 1, 2024

( 1,567,913 )

PSUs cancelled/forfeited

PSUs unvested – September 30, 2023

of September 30, 2023, the total unrecognized compensation expense related to unvested PSUs was approximately $ 21,829,000 , which is expected

PSUs unvested – March 31, 2024

of March 31, 2024, the total unrecognized compensation expense related to unvested PSUs was approximately $ 14,553,000 , which is expected

to be recognized over a weighted-average period of 1.01 years, based on estimated and actual vesting schedules of the applicable PSUs.

The stock-based compensation for PSUs during the three and nine months ended September 30, 2023 was $ 3,948,000 and $ 10,115,000 , respectively,

and $ 1,264,000 and $ 3,792,000 during the same periods in 2022, respectively.

The stock-based compensation for PSUs during the three months ended March 31, 2024 and 2023 was $ 3,638,000 and $ 1,263,000 , respectively.

Compensation Summary

Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:

OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES, DIRECTORS AND CONSULTANTS

For the Three Months Ended March 31,

Employees - selling, general and administrative

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damages from the other.

The Company expects the trial to take place in 2024.

The Company expects the trial to take place in August 2024.

and Professional Liability

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given time reflects current market conditions, including cost and availability, when the policy is written.

addition to the indemnification provisions contained in the Company’s governing documents, the Company generally enters into separate

addition to the indemnification provisions contained in the Company’s charter documents, the Company generally enters into separate

indemnification agreements with each of the Company’s directors and officers.

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individual with respect to which the individual may be entitled to indemnification by the Company.

The Company indemnifies Oaktree for

certain claims and losses associated with the Oaktree Loan.

The Company also indemnifies its lessors in connection with its facility

leases for certain claims arising from the use of the facilities.

These indemnities do not provide for any limitation of the maximum

potential future payments the Company could be obligated to make.

Historically, the Company has not incurred any payments for these obligations

and, therefore, no liabilities have been recorded for these indemnities in the accompanying condensed consolidated balance sheets.

License Agreement – Related Party

Company entered into a license agreement in April 2017, as amended in April 2018 (the “Klarity License Agreement”), with

Lindstrom, M.D., a former member of its Board of Directors.

Pursuant to the terms of the Klarity License Agreement, the Company

licensed certain intellectual property and related rights from Dr.

Lindstrom to develop, formulate, make, sell, and sub-license the topical

ophthalmic solution Klarity designed to protect and rehabilitate the ocular surface (the “Klarity Product”).

the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr.

Lindstrom ranging from 3% to 6% of

net sales, dependent upon the final formulation of the Klarity Product sold.

In addition, the Company is required to make certain milestone

payments to Dr.

Lindstrom including:

(i) an initial payment of $ 50,000 upon execution of the Klarity License Agreement, (ii) a second

payment of $ 50,000 following the first $ 50,000 in net sales of the Klarity Product;

and (iii) a final payment of $ 50,000 following the

first $ 100,000 in net sales of the Klarity Product.

All of the above referenced milestone payments were payable at the Company’s

election in cash or shares of the Company’s restricted common stock.

Payments totaling $ 0 and $ 146,000 were made during the three

and nine months ended September 30, 2023, respectively, compared to $ 77,000 and $ 199,000 during the same periods in 2022, respectively.

Royalty expenses were $ 71,000 and $ 220,000 during the three and nine months ended September 30, 2023, respectively, compared to $ 67,000

and $ 244,000 during the same periods in 2022, respectively, and were included in accounts payable to Dr.

Asset Purchase Agreement – Related Party

December 2019, the Company entered into an asset purchase agreement (the “Lindstrom APA”) with Dr.

Lindstrom, a former member

of its Board of Directors.

Pursuant to the terms of the Lindstrom APA, the Company acquired certain intellectual property and related

rights from Dr.

Lindstrom to develop, formulate, make, sell, and sub-license an ophthalmic injectable product (the “Lindstrom Product”).

the terms of the Lindstrom APA, the Company is required to make royalty payments to Dr.

Lindstrom ranging from 2% to 3% of net sales,

dependent upon the final formulation and patent protection of the Lindstrom Product sold .

In addition, the Company is required to make

certain milestone payments to Dr.

Lindstrom including an initial payment of $ 33,000 that was due upon execution of the Lindstrom APA.

Lindstrom was paid $ 0 and $ 17,000 in cash during the three and nine months ended September 30, 2023, respectively, and $ 8,000 and

$ 23,000 during the same periods in 2022, respectively.

The Company incurred $ 9,000 and $ 26,000 for royalty expenses related to the Lindstrom

APA during the three and nine months ended September 30, 2023, respectively, and $ 9,000 and $ 24,000 during the same periods in 2022,

respectively.

Asset Purchase, License and Related Agreements

Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors and related

parties (the “Inventors”) through multiple asset purchase agreements, license agreements, strategic agreements and commission

In general, these agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for

the acquired intellectual property and that the Company will use commercially reasonable efforts to research, develop and commercialize

a product based on the acquired intellectual property.

In addition, the Company has acquired a right of first refusal on additional intellectual

property and drug development opportunities presented by these Inventors.

consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based

Several of the Company’s asset

purchase and license agreements contain customary representations, warranties, covenants and confidentiality provisions, and also contain

mutual indemnification obligations related primarily to performance under the respective agreements.

The Company also indemnifies its

lessors in connection with its facility leases for certain claims arising from the use of the facilities.

These indemnities do not provide

for any limitation of the maximum potential future payments the Company could be obligated to make.

Historically, the Company has not

incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying

condensed consolidated balance sheets.

Purchase, License and Related Agreements

Approved Product Acquisitions

recent years, the Company has acquired commercial and product rights to various FDA approved ophthalmic medications and products through

asset purchase, licenses, supply and/or other related agreements.

In general, in exchange for product and commercial rights these agreements

provide the counterparties with certain upfront and contingent milestone payments typically related to certain annual sales amounts and

manufacturing events, and in certain cases, per unit transfer prices and royalties on sales of some of the products.

During the three

months ended March 31, 2024 and 2023, $ 274,000 and $ 0 were incurred under these agreements as royalty expenses, respectively.

Company incurred $ 0 and $ 5,000,000 related to upfront and milestone payments under these agreements during the three months ended March 31,

2024 and 2023, respectively.

As of March 31, 2024, the remaining contingent consideration payable pursuant to these agreements were not

considered probable and reasonably estimable and therefore, no amount was accrued related to these contingent obligations during the

three months ended March 31, 2024.

At the time contingent consideration payable becomes probable and reasonably estimable the additional

consideration, if any, paid will be allocated to the assets based on their initial estimated fair values as a percent of the total purchase

Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors, innovator

companies and related parties (the “Inventors”) through multiple asset purchase agreements and license agreements.

these agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual

property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on the

acquired intellectual property.

In addition, the Company has acquired a right of first refusal on additional intellectual property and

drug development opportunities presented by these Inventors.

consideration for the acquisition of these intellectual property rights, the Company is obligated to make payments to the Inventors based

on the completion of certain milestones, generally consisting of:

(1) a payment payable within 30 days after the issuance of the first

patent in the United States arising from the acquired intellectual property (if any);

(2) a payment payable within 30 days after the

Company files the first investigational new drug application (“IND”) with the U.S.

Food and Drug Administration (“FDA”)

for the first product arising from the acquired intellectual property (if any);

(3) for certain of the Inventors, a payment payable within

30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual

property (if any);

and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or

licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s

development costs associated with such product.

If, following five years after the date of the applicable asset purchase agreement, the

Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where

data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property,

the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to

the Inventors.

During the three and nine months ended September 30, 2023, $ 220,000 and $ 705,000 were incurred under these agreements

as royalty expenses, respectively, and $ 185,000 and $ 695,000 during the same periods in 2022, respectively.

July 2021, the Company entered into a License and Supply Agreement (the “Sintetica Agreement”) with Sintetica S.A.

(“Sintetica”),

pursuant to which Sintetica granted the Company the exclusive license and marketing rights to its patented ophthalmic drug candidate

(“IHEEZO”) in the U.S.

to the Sintetica Agreement, the Company agreed to pay Sintetica a per unit transfer price to supply IHEEZO, along with a per unit royalty

for units sold.

The Company is required to pay Sintetica up to $ 18,000,000 in one-time milestone payments including a $ 5,000,000 payment

(the “Upfront Payment”) that was due within 30 days of signing the Sintetica Agreement and the balance of payments due upon

achievement of certain regulatory and commercial milestones.

Under the terms of the Sintetica Agreement, Sintetica was responsible for

regulatory filings for IHEEZO in the U.S.

As of September 30, 2023, the Company had paid all milestone amounts due under the Sintetica

Agreement, and all commercial milestones were previously capitalized as an intangible asset.

August 2023, the Company amended the Sintetica Agreement to allow for early payment of previously accrued amounts for commercial related

milestones associated with sales of IHEEZO in exchange for a $ 550,000 reduction in the milestone amounts due, and as a result of this

amendment, the Company reduced the intangible asset value associated with IHEEZO by $ 550,000 and paid the remaining commercial milestone

amount of $ 4,450,000 during the three and nine months ended September 30, 2023.

to certain limitations, the Sintetica Agreement has a ten-year term, and allows for a ten-year extension if certain sales thresholds

August 2021, the Company entered into a License Agreement and a Basic Sale and Purchase Agreement (together, the “Wakamoto Agreements”)

with Wakamoto Pharmaceutical Co., Ltd.

(“Wakamoto”), pursuant to which Wakamoto granted the Company the exclusive license

and marketing rights to its ophthalmic drug candidate (“MAQ-100”) in the U.S.

to the Wakamoto Agreements, Wakamoto will supply MAQ-100 to the Company, and the Company will pay Wakamoto a per unit transfer price

to supply MAQ-100.

In addition, the Company is required to pay Wakamoto various one-time milestone payments totaling up to $ 2,000,000

upon the achievement of certain regulatory milestones and up to $ 6,200,000 upon the achievement of certain commercial milestones.

the terms of the Wakamoto Agreements, the Company will be responsible for regulatory filings and fees for MAQ-100 in the U.S.

Through September 30, 2023, no amounts have been paid or accrued under the Wakamoto Agreements.

to certain limitations, the term of the Wakamoto Agreements is for five years from the date of the FDA’s market approval of MAQ-100

and may be extended for a five-year period if certain unit sales thresholds are met.

Commercial Alliance Agreement – Terminated

August 2020, the Company, through its wholly owned subsidiary ImprimisRx, LLC, entered into a Commercial Alliance Agreement (the “Dexycu

Agreement”) with Eyepoint Pharmaceuticals, Inc.

(“Eyepoint”), pursuant to which Eyepoint granted the Company the non-exclusive

right to co-promote DEXYCU ® (dexamethasone intraocular suspension) 9% (“DEXYCU”) for the treatment of post-operative

inflammation following ocular surgery in the United States.

Pursuant to the Dexycu Agreement, Eyepoint pays the Company a fee calculated

based on the quarterly sales of DEXYCU in excess of predefined volumes to specific customers of the Company in the U.S.

Under the terms

of the Dexycu Agreement, the Company agreed to use commercially reasonable efforts to promote and market DEXYCU in the U.S.

to a mutual termination agreement entered into on October 7, 2022, the Dexycu Agreement terminated on January 1, 2023.

Following the

preliminary Hospital Outpatient Prospective Payment System (HOPPS) rule proposed by the Centers for Medicare & Medicaid Services

(CMS) in July of 2022, which did not contain an extension of the pass-through payment period for DEXYCU beyond December 31, 2022, the

Company entered into a Mutual Termination Agreement (the “Termination Agreement”) with Eyepoint on October 7, 2022, pursuant

to which Eyepoint and the Company agreed (a) that the Company would continue to support the sale of DEXYCU through the fourth quarter

of 2022, consistent with the Company’s level of effort during the January through September 2022 period, (b) to decrease the required

minimum quarterly sales levels based on DEXYCU unit demand for the fourth quarter of 2022, and (c) to terminate the Dexycu Agreement,

along with ancillary letter agreements, effective January 1, 2023.

the three and nine months ended September 30, 2022, the Company recorded $ 1,044,000 and $ 3,576,000 , respectively, in commission revenues

related to the Dexycu Agreement.

(1) a payment payable within 30 to 45 days after the issuance

of the first patent in the United States arising from the acquired intellectual property (if any);

(2) a payment payable within 30 days

after the Company files the first investigational new drug application (“IND”) with the U.S.

Food and Drug Administration

(“FDA”) for the first product arising from the acquired intellectual property (if any);

(3) for certain of the Inventors,

a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from

the acquired intellectual property (if any);

and (4) certain royalty payments based on the net receipts received by the Company in connection

with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things)

the Company’s development costs associated with such product.

If, following five years after the date of the applicable asset purchase

agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated

a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired

intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the

acquired technology to the Inventors.

During the three months ended March 31, 2024 and 2023, $ 180,000 and $ 376,000 were incurred under

these agreements as royalty expenses, respectively.

and Marketing Agreements

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Commission expenses of $ 0 and $ 130,000 were incurred under these agreements for commission

expenses during the three and nine months ended September 30, 2023, respectively, and $ 1,041,000 and $ 3,188,000 during the same periods

in 2022, respectively.

expenses during the three months ended March 31, 2024 and 2023, respectively.

Manufacturing

Company had entered into manufacturing agreements with respect to third-party contract manufacturers for its FDA approved pharmaceutical

Some of these contract manufacturing agreements require minimum annual order amounts.

The Company has committed to pay approximately

$ 2,728,000 related to contract manufacturing agreements for the year ending December 31, 2024.

SEGMENTS AND CONCENTRATIONS

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the Company as a single operating segment.

Company has two products that each accounted for more than 10% of total revenues during the three and nine months ended September

The Company had two and three products that each accounted for more than 10% of total revenues during the three and nine

months ended September 30, 2022, respectively.

These products collectively accounted for 32 %

of revenues during the three and nine months ended September 30, 2023, respectively, and 34 %

during the same periods in 2022, respectively.

of September 30, 2023 and December 31, 2022, accounts receivable from a single customer accounted for 48 % and 0 % of total accounts receivable,

Company had one and two products that accounted for more than 10% of total revenues during the three months ended March 31, 2024 and

2023, respectively.

For the three and nine months ended September 30, 2023, revenues from a single customer accounted for 35 % and 23 % of total

revenues, respectively.

For the three and nine months ended September 30, 2022, no customer exceeded 10% of total revenues.

These products accounted for 11 % and 36 % of revenues during the three months ended March 31, 2024 and 2023, respectively.

of March 31, 2024 and December 31, 2023, accounts receivable from a single customer accounted for 68 % and 80 % of total accounts receivable,

respectively.

For the three months ended March 31, 2024, revenues from a single customer accounted for 27 % of total revenues.

three months ended March 31, 2023, no customer exceeded 10% of total revenues.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 96 % and

79 % of active pharmaceutical ingredient purchases during the three and nine months ended September 30, 2023, respectively, and 52 % and

66 % during the same periods in 2022, respectively.

These suppliers collectively accounted for 85 % of active

pharmaceutical ingredient purchases during the three months ended March 31, 2024, and 90 % during the same period in 2023.

SUBSEQUENT EVENTS

Company has performed an evaluation of events occurring subsequent to September 30, 2023 through the filing date of this Quarterly Report

Company has performed an evaluation of events occurring subsequent to March 31, 2024 through the filing date of this Quarterly Report

on Form 10-Q.

Based on its evaluation, no events other than those described below need to be disclosed.

November 2023, the Company issued 125 shares of common stock and received proceeds of $ 1,000 upon the exercise of options to purchase

125 shares of common stock with exercise price of $ 6.75 per share.

October 2023, the Company transferred the NDAs and marketing authorizations for all of the Santen Products in the U.S.

The Company expects

Santen to transfer the Canadian marketing authorizations for VERKAZIA and CATIONORM PLUS by March 31, 2024.

April 2024, the Company issued 1,481 shares of common stock and received proceeds of $ 11,000 upon the exercise of options to purchase

1,481 shares of common stock with exercise prices between $ 10.62 and $ 12.72 per share.

April 2024, the Company sold all 1,982,000 shares of common stock it held of Eton in a block trade at a gross price of $ 3.00 per share.

After deducting trading expenses and commissions of approximately $ 436,000 , the Company received net proceeds of $ 5,510,000 related to

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements